Meta to build $1.5 billion data center in Northeast El Paso

From El Paso Matters:

Technology giant Meta Platforms is investing $1.5 billion to build a data center that will employ 100 workers on a 1,000-acre parcel in far Northeast El Paso near the Texas-New Mexico state line, a scaled-up investment from what the company committed to in late 2023.

The increased investment comes as the global artificial intelligence race has led some of the world’s largest companies to the El Paso area to develop new data center facilities that power the modern internet.

A month after Doña Ana County officials approved a separate $165 billion data center campus that OpenAI and Oracle will develop, Meta representatives for the first time Wednesday announced the company’s El Paso data center project publicly during an event at the Plaza Hotel Pioneer Park in Downtown.

In late 2023, Meta negotiated an incentive package with the city in exchange for investing $800 million and also secured a water supply agreement with El Paso Water. But a Meta executive said the company decided to increase its investment amid the industrywide escalation in AI technology development.

“What you’re seeing here is us having to grow with the needs of our business,” Brad Davis, Meta’s director of data center community and economic development, told El Paso Matters.

“Everything that is ultimately needed with Meta and, frankly, everything that’s needed online, is driven by data centers. They’re the backbone that makes everything in modern society possible, allows us to connect billions of people across the world,” Davis said. “This growth that you’re seeing, a lot of it is driven by AI. This data center itself will be optimized for AI workloads.”

Meta center’s electricity, water usage

Companies have been spending hundreds of billions of dollars in recent years across the United States wherever electricity, water and land are readily available in order to develop data centers that house hardware and computer servers that enable AI products.

Davis said Meta’s new El Paso data center will utilize a “closed-loop” liquid cooling system that will recycle water instead of the water-intensive evaporative cooling technology that older data centers use to keep computer equipment from overheating.

Meta’s water supply agreement with El Paso Water permits the site to use an average of 750,000 gallons of potable water daily initially, and that increases to permitted daily average usage of 1.5 million gallons after the campus is fully built out.

El Paso Water each year supplies around 40 billion gallons of water to customers sourced mostly from groundwater wells and, to a lesser extent, the Rio Grande. El Paso Electric, the water utility’s biggest customer, consumed an average of 19 million gallons of water daily last year, according to El Paso Water’s financial report.

At the full usage detailed in the water supply agreement, the Meta facility will be permitted to consume more water than Marathon Petroleum’s refinery in South-Central El Paso used last year, when it purchased 1.1 million gallons from El Paso Water each day on average.

However, Davis said Meta’s facility will use far less water than the permitted amount.

John Balliew, El Paso Water’s chief executive, has previously said that Meta’s El Paso data center would only need to ramp up water usage on extremely hot days.

“That’s what’s ultimately in our contract. It’s probably a number that’s not necessarily indicative of what actual consumption numbers will necessarily be,” Davis said of the permitted water usage figures. “I’m assuming our consumption numbers will be far less.”

Davis said Meta will report the data center’s electricity and water usage in its annual sustainability report posted on its website along with figures for the two dozen other data centers the company operates in the United States.

In addition to 100 permanent positions, Davis said the site will employ 1,800 workers during the construction phase. He said some early work at the site has started, and the goal is to bring the data center into operation by 2028.

El Paso Electric over the last year developed a special electricity rate for Meta’s data center, which the utility said would require more than 100 megawatts of electricity capacity – enough to power tens of thousands of homes – and would operate at 90% efficiency, meaning the data center’s electricity consumption would rarely fluctuate.

In testimony submitted to the Public Utility Commission of Texas, El Paso Electric executives said they conducted a detailed study to determine how much it would cost to serve the large amount of power Meta’s incoming data center will require. The utility’s rates will ensure the company pays the full cost of service and that Meta will not receive discounted rates, according to the utility’s testimony.

“At full operation, the new Data Center will be EPE’ s largest retail customer,” James Schichtl, vice president of customer and regulatory solutions for El Paso Electric, said in filings submitted to the PUC. “The proposed rates are based on a full cost of service analysis for the expected customer retail load profile and do not represent a ‘discount’ relative to the applicable retail rates that would otherwise apply.”

Before the data center’s rates were finalized in August, Public Utility Commissioner Courtney Hjaltman raised the concern that El Paso Electric customers could subsidize the cost to serve Meta’s data center.

As a result, El Paso Electric guaranteed in writing that the next time it seeks to raise customers’ rates, the utility will “provide evidence” that Meta’s El Paso data center is “not being subsidized by other customers and that the rates contained therein do not constitute discounted rates,” according to filings submitted to the PUC.

Meta’s facility likely will be powered by solar panels, although the full details of its electricity supply aren’t clear. Schichtl told the PUC that El Paso Electric assumed the facility would require two large solar farms to meet its power needs. By comparison, the Project Jupiter data center near the Santa Teresa port of entry will rely on a massive natural gas power plant for its power supply.

In general, El Paso Electric is incentivized to welcome data centers into its service territory. For one, data centers that run constantly are customers that produce steady revenue and cash flow compared with residential customers. And El Paso Electric wants to build new infrastructure that serves the data center, because the utility can earn a profit margin on that capital investment.

While Meta’s facility will directly tie into El Paso Electric’s power grid, the Project Jupiter campus in Santa Teresa will not connect to El Paso Electric’s system and is developing its own isolated electricity generation system.

El Paso Meta data center’s city incentives

The main part of the incentive deal Meta negotiated with the city is an abatement of 80% of city property taxes over 35 years. And the city will give $12.5 million to Meta to improve road infrastructure near the data center.

The city pulled that money from the Texas Economic Development fund, a pot of money established after El Paso Electric agreed to pay the city $80 million over 15 years in exchange for the city’s approval of the acquisition of the utility in 2020 by a J.P. Morgan-owned investment fund.

Local supporters of Meta’s project have said the tax breaks are a good deal for the region because, while the city will forgo most of the new potential tax revenue for decades, other taxing entities will receive full property tax payments from Meta. And it’s possible the taxes Meta pays to the city and local taxing entities could grow over time as Meta invests more in the years ahead to refresh computer equipment at its facility.

Critics of tax breaks for data centers, however, argue the projects strain infrastructure and create relatively few jobs in exchange for foregone tax revenue. The city of Tucson rejected an Amazon-led data center project that would have consumed 2 million gallons of water daily.

“Our community has been clamoring for spreading the tax burden from residential taxpayers to the commercial sector,” said Jon Barela, CEO of the Borderplex Alliance, an economic development organization in the region.

“This project will go very far in absorbing much of that tax burden, especially when it comes to the schools, both the Ysleta school district, El Paso Community College, but also health care,” he said, referring to public health care entities such as University Medical Center of El Paso.

Jon Barela, CEO, Borderplex Alliance

Barela and others have touted the benefits the construction of a Meta data center had on Los Lunas, New Mexico, after construction began there in 2015.

Officials with the New Mexico Economic Development Department have said the population of Los Lunas grew by 20% over the last decade – compared with 1% statewide population growth across New Mexico – and attributed that to Meta’s data center investment there.

“It’s pretty safe to draw a straight line from (Meta’s data center) in Los Lunas to this population growth,” Mark Roper, acting secretary of the New Mexico Economic Development Department, recently told the Doña Ana County Board of Commissioners.

The El Paso region broadly may be seeing the beginning of a regional industry centered around building and servicing data centers.

The El Paso City Council last month voted to give incentives worth $875,000 to a San Jose, California-based technology startup company called Ferveret that develops technology to cool data centers with a liquid solution. In exchange, Ferveret said it would hire 30 workers for its facility located at the so-called Innovation Factory at El Paso International Airport.

“Economic development projects, especially at this level of expenditure, will lead to a clustering of potential other data centers,” Barela said. “But let me be clear: not all data centers are created equal. Meta is a world leader in providing the most efficient and cutting-edge data centers when it comes to environmental footprint,” he said, adding that the company invests heavily to minimize the impact of their data center facilities.

The Project Jupiter data center campus – a wholly separate project from Meta’s but a similar facility meant to enable AI – was welcomed by some residents of Doña Ana County, but was also met with fierce criticism and intense concern from others.

After the Doña Ana Board of County Commissioners approved the Project Jupiter data center project during a meeting in Las Cruces on Sept. 19, residents who had spoken for hours in opposition formed a raucous protest in the chambers and screamed and jeered at the commissioners, largely over concerns that project would be an unsustainable drag on the region’s water apply.

Project Jupiter’s developers have said the campus will consume an average of 20,000 gallons of water per day.

Why did Meta choose El Paso?

Davis declined to comment on the opposition to Project Jupiter, but said the local governments and utilities in El Paso were good and welcoming partners to Meta.

“When we’re going through this process, we want to make sure that a data center suits the needs of that particular community,” he said, adding that Meta plans to partner with the nonprofit Dig Deep, which works to provide first-time water service to colonias that lack water or sewer services.

“From an El Paso standpoint, we were able to identify an amazing site that had great access to infrastructure and energy,” Davis said about why Meta selected the El Paso site for a new facility.

“It has a strong pool of talent that we feel absolutely confident will allow us to construct the data center on an optimal timeline at the quality that we require,” Davis said. “We have no concerns about operational staffing.”